Restoration Hardware tumbles after saying it'll prioritize earnings over revenues
- Restoration Hardware reported earnings that beat on profits but missed on sales.
- The high-end furniture retailer said it will prioritize earnings over revenues.
- Shares are down more than 10%.
- Watch Restoration Hardware trade in real-time here.
Restoration Hardware shares are down more than 10% Wednesday after the high-end furniture retailer delivered earnings that beat on profits but missed on sales. The company also raised full-year guidance for earnings per share but trimmed its estimate for revenues.
The home-furnishings company reported adjusted earnings of $2.49 per share in the second-quarter, nearly four times that of last year and well above the $1.75 that was expected by Wall Street, according to Bloomberg data. Sales totaled $642 million - up 4% from last year's $615 million - but that missed the $660 million that analysts were anticipating.
"Our record second quarter results demonstrate our commitment to earnings growth, the emerging power of our new business model, and our continued success revolutionizing physical retailing," the company said in the press release.
"As articulated since the beginning of the year, we continue to manage the business with a bias for earnings versus revenue growth. We will restrain ourselves from chasing low quality sales at the expense of profitability, and instead focus on optimizing our new business model while building an operating platform that will enable us to compete and win over the long-term."
Looking ahead, RH raised its full-year guidance for a third time and now sees adjusted diluted earnings per share to be in the range of $7.35 to $7.75, 15% up from its previous estimate of $6.34 to $6.83. Meanwhile, the company cut its revenue guidance by 2% to $2.51 billion. Analysts surveyed by Bloomberg were expecting earnings of $7.52 per share on $2.52 billion sales.
Analysts from Oppenheimer were impressed with the results.
"The largely better than expected Q2 (July) results and now more optimistic financial guidance that RH outlined yesterday (Sept. 4th), after the market close, reflect underlying improvements in a still under-development business model," analysts Brian Nagel and Samantha Lanman said in a note sent out to clients on Wednesday.
"Management explained clearly that this dynamic reflects strategic decisions on the part of the company that should, over time, give way to a much stronger operating model. As we have indicated, we are intrigued by the unique nature of RH and the company's efforts to build from the ground up an innovative omni- channel model. We have stayed on the sidelines with RH on concerns of quarter-to- quarter fluctuations in trends at the company." They rated RH "perform."
Shares are up 53% since this year.
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